Niilo Jaaskinen said he "suggests that all the UK’s pleas should be rejected and that the Court of Justice dismiss the action".
The EU law limits a bonus to no more than a banker's fixed pay, or twice that level with shareholder approval. The aim is to curb excessive risk-taking in banking that led to the financial crisis.
The Treasury has opposed the move on the grounds that it is an ‘overextension’ of the EU’s remit, and does not contribute to improving financial safety, with the cap seen as a damaging influence on the UK financial services industry which could ‘undermine financial stability’.
The advocate general's opinion is a good indicator of the final decision of the ECJ, expected next year.
Mr Jaaskinen said:
"Given that the variable component of remuneration impacts directly on the risk profile of financial institutions, it can affect the stability of financial institutions who can operate freely across the EU, and in consequence that of the financial markets of the EU."
At a hearing in September, the UK endured a tough time in court, and independent lawyers said the ECJ had focused on the weakest, rather than the strongest, parts of its case.
Andrew Bailey, the chief executive of the Bank's Prudential Regulation Authority, has said the cap is "the wrong policy", and the Bank's Governor Mark Carney has said that an "unintended consequence" of the cap is that bankers' fixed pay will increase, and would need subsequent regulation.
Rob Moulton, a financial services partner at law firm Ashurst, said:
"I am pessimistic from the (UK) government's point of view. Many in the industry are."
However Alexandria Carr, a financial services lawyer at Mayer Brown, said:
"The court chose to plough its own furrow earlier this year when it, contrary to the opinion of its Advocate General, dismissed the UK's challenge to the short selling regulation."
"Thus, in a highly politically charged case, it is impossible to predict how the opinion will influence the court's final decision."
Jay Vaananen, former private banker and the author of Banker's Umbrella, said:
"The UK government’s opposition to bonus caps for bankers amounts to a campaign to license the pillaging of clients’ coffers.
"A limitless bonus structure reduces the client to the role of an industrialised milking cow.
"Investment banking, private banking, retail banking — it doesn’t matter what kind of banking — the fact is that banker bonuses are designed to suck the maximum amount possible from the client.
"Despite legislative attempts to protect clients, a bank will always sell its clients the most profitable product it can legally get away with.
"The most profitable products are the ones with the highest fees and often involve leverage.
"In Europe, MiFID has created a playing field that banks are working hard to navigate, creating high fee products that still adhere to the risk profile of the client.
"Despite the intent of the legislation, what is best for the client does not even enter the equation from the banks' perspective."
